Balance of Payments Every country keeps an accounting record of international transactions between itself and the rest of the world. The government keeps this record of transactions, but the transactions are primarily made by individual people and businesses – Not the Government.

Balance of Payments The balance of payments has three main categories: The Current Account The Capital Account The Financial Account

The Current Account Current Account US Exports and US Imports Records money coming into the US as payments for goods and services the sell to other countries (Exports) = Credits Records money we pay to other countries for goods and services we purchase from other countries (Imports) = Debits The current account is equal to the value of exports minus the value of imports

The Current Account The Current Account is the Balance of Trade If the Current Account Balance is a Positive Number = Trade Surplus (selling more to other countries than purchasing from other countries) If the Current Account Balance is a Negative Number = Trade Deficit (purchasing more from other countries than we are buying from other countries)

Balance of Payments The Balance of Payments also records International Transactions Stock purchases Bond Purchases Capital Purchases Real Estate Purchases All Transactions between US individuals and business to individuals and businesses in other countries. All Transactions between Individuals and Business from other countries to US individuals and Businesses

Balance of Payments Ultimately, the Balance of Payments must balance. Balance of Payments vs. Balance of Trade Balance of Trade records Imports vs. Exports Balance of Payments records Imports, Exports, and all financial transactions between individuals in the US and individuals in other countries.